BIR Ruling [DA-040-01]

March 20, 2001 BIR RULING [DA-040-01] R.A. 4726; 27; 57 (B); 188 DA-305-2000 Mariano C . Ereso 149 Roxas Boulevard Paraaque City S i r : This refers to your letter dated November 20, 2000 requesting for a ruling that the transfer and conveyance of the common elements or areas, including four (4) parcels of land of a condominium project known as Echelon Tower Condominium Project (Project) by Arcya Commercial Corporation (Arcya) in favor of the Echelon Tower Condominium Corporation (Echelon), is exempt from the creditable withholding tax and documentary stamp tax. It is represented that Arcya, a domestic corporation, is the registered owner of four (4) parcels of land situated at 2100 A. Mabini Street, Malate, Manila covered by Transfer Certificate of Title No. 149991 of the Registry of Deeds for the City of Manila where the condominium project known as the Echelon Tower Condominium Project was constructed; that the subject property has a total area of Two Thousand One Hundred Eighty Seven Square Meters and Eighty Decimeters (2,187.80); that Arcya in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act, constructed on the above-stated property a commercial and residential condominium building consisting of 115 units, particulars of which are as follows: (a) 30 one-bedroom units, (b) 57 two-bedroom units; (c) 28 three-bedroom units, and (d) the denominated Ground, Second, Third, Fifth and Sixth Floors as commercial units; that on the other hand, Echelon is a non-stock, non-profit corporation formed and organized in accordance with R.A. No. 4726, for the purpose of managing and holding title to all the common areas in the condominium project including the land on which the condominium is located; that a Deed of Conveyance was executed by and between Arcya and Echelon, whereby the former conveyed title to the said land, the common areas of the building, facilities and equipment of the project, in favor of the latter, free from all liens and encumbrances; that the said Deed of Conveyance was executed without any monetary consideration, in pursuance of the requirements of R.A. No. 4726 as amended; and that the said conveyance is therefore sought to be exempted from the creditable withholding tax and documentary stamp tax inasmuch as said conveyance is being done simply to comply with the requirements of the Condominium Act, and for the protection of the unit-owners. In reply, please be informed that since the Deed of Conveyance above-mentioned is without consideration and is not in connection with a sale made to the condominium corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the condominium corporation is for the management of the project for the common benefit of the unit-owners, pursuant to Section 10 of R.A. 4726, otherwise known as the Condominium Act. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57(B) in relation to Section 27 of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA 305-2000 dated February 24, 2000) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cATDIH Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service